Beyond A Pragmatic Assessment Of Disruptive Potential In

1 Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In financial ServicesPart of the Future of financial services series | Prepared in collaboration with DeloitteAugust 20172 Consistent with the World Economic Forum s mission of applying a multistakeholder approach to address issues of global impact, creating this report involved extensive outreach and dialogue with numerous organizations and individuals. They included the Forum's financial services , Innovation and Technology communities, professionals from academia and the public sector. The outreach involved over 150 interviews and 10 international workshop sessions, encouraging collaborative dialogue to discuss insights and opportunities concerning fintech disruption within the financial services industry .

2 The holistic and global perspective of this report would not be as enriched without the support and contributions from the subject matter experts who assisted in driving our thoughts forward about the future of the financial services industry . In particular, we thank this project s Steering Committee and Working Group, introduced in the Acknowledgements section, which played an invaluable role with their expertise and patient mentorship. Also critical has been the ongoing institutional support for this initiative from the Forum and the leadership of our chairman, whose vision of the Fourth Industrial Revolution has been inspirational to this work. Finally, we are grateful to Deloitte Consulting LLP in the United States, an entity within the Deloitte1network, for its generous commitment and support in its capacity as the official professional services adviser to the Forum for this refers to one or more of Deloitte Touche Tohmatsu Limited (a UK private company limited by guarantee [ DTTL ]), its network of member firms and their related entities.

3 DTTL and each of its member firms are legally separate and independent entities. DTTL, also referred to as Deloitte Global , does not provide services to clients. Please see a more detailed description of DTTL and its member firms. Please see a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be availableto attest clients under the rules and regulations of public publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial , investment, legal, tax or other professional advice or services . This publication is not a substitute for such professional advice or services , nor should it be used as a basis for any decision or action that may affect your business.

4 Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. Deloitte shall not be responsible for any loss sustained by any person who relies on this feedback or questions, contact:R. Jesse McWaters World Economic Forum, Lead Galaski Deloitte following senior leaders from global financial institutions provided guidance, oversight and thought leadership to the Future of financial services series as its Steering Committee:Anju PatwardhanSenior Partner, CreditEase Fintech FundDavid PuthChief Executive Officer,CLS Bank InternationalWilliam SheedyGlobal Executive, Corporate Strategy, M&A, Government Relations, VisaDieter WemmerChief financial Officer, AllianzKimberly Hammonds Global Chief Operating Officer and Chief Information Officer, Deutsche BankJason HarrisChief Executive, International Property and Casualty, XL CatlinMichael HarteGroup Head of Innovation, BarclaysAxel LehmannGroup Chief Operating Officer and Member of the Group Executive Board, UBSR obert ContriGlobal financial services Leader, DeloitteAnn CairnsPresident, International Markets,MastercardDavid Craig President, financial and Risk,Thomson ReutersJohn Flint Chief Executive.

5 Retail Banking and Wealth Management, HSBCM embers of the Steering Committee4 The project team would also like to acknowledge the following executives of global financial institutions who helped define the project framework and shape strategic analyses as its Working Group:Josh BottomleyGlobal Head, Digital,HSBC BankThomas BrownPartner, Paul HastingsClaire CalmjaneDirector, Innovation,Lloyds Banking GroupChristof EdelGlobal Head, Strategy and Business Development, financial , Thomson ReutersRoland FejfarVice President, FinTech IBD,Morgan StanleyRob Galaski (Project Adviser)Americas financial services Leader, DeloitteDorothy HilleniusDirector, Corporate Strategy,ING BankMembers of the Working GroupLena Mass Cresnik, PhDBlackRockVictor MatarranzSenior Executive Vice President, Strategy, and Executive Chairman s Office, SantanderNeil MummVice President, Corporate Strategy, VisaMax NeukirchenManaging Director and Head, Strategy, JP Morgan ChaseRobert PalatnickManaging Director and Chief Technology Architect, DTCCJ ustin PinkhamSVP and Group Head, Payments Innovation, MastercardJP RangaswamiChief Data Officer, Deutsche Bank Bob ReanyEVP, Identity Solutions Product, MastercardPeter RutlandPartner and Global Co Head, financial services , CVC Capital PartnersNicolas de SkowronskiDeputy Head, Investment Solution Group.

6 Bank Julius BaerHuw Van SteenisGlobal Head, Strategy, SchrodersColin TeichholtzPartner and Portfolio Manager, Pine River Capital ManagementFabian Vandenreydt Global Head, Securities Markets, Innotribe &the SWIFT Institute, SWIFT5 The Disruptive Innovation in financial services project was launched at the World Economic Forum Annual Meeting 2014 in Davos Klosters,in a world still consumed with navigating the aftershocks of the global financial crisis. But in the wings, a new challenge for the financial system was growing in the form of fintech new entrants that promised to rapidly reshape how financial products were structured, provisioned and four years later, as this initiative draws to a close, we take the opportunity to reflect on the changes to the financial system taking stock of the impacts that fintechs have had and considering their evolving relationships with both incumbents and regulators.

7 More importantly, it presents an opportunity to consider what lies Beyond the horizon for financial services . The technologies of the Fourth Industrial Revolution have triggered a seismic shift in the financial system, the implications of which will extend far Beyond the fintechs that pioneered their use in financial services . Value chains that have characterized the industry for decades are being disrupted and reshaped with implications for customers, regulators, incumbents and every other stakeholder in the financial this fourth report of the Future of financial services series, we hope to build upon our previous work and provide the many stakeholders of the financial system with a better understanding of the forces transforming financial services , as well as an outlook for its NoteR.

8 Jesse McWatersProject Lead, Disruptive Innovation in financial ServicesWorld Economic ForumRob GalaskiAmericas financial services LeaderDeloitte6 Contents1. Context and 72. Key Findings and Uncertainties .. 113. Sector Deep Digital Investment Equity Market 189 Contact 1 Context and ApproachWORLD ECONOMIC FORUM | 201778 This report represents the culmination of three phases of research into the transformative role of fintechs on the financial services ecosystemPhase 1 laid out a foundation for understanding the transformative Potential of new entrants and innovations on business models in financial services . It focused on: Establishing a clear taxonomy for understanding which fintech innovations are the most relevant Mapping possible futures for the evolutionary paths of emerging fintech innovations Exploring the implications of fintech on key stakeholders (consumers, incumbents,regulators, etc.)

9 Phase 1outcomes are captured inthe report, The Future of financial ServicesCONTEXT AND APPROACH | PAST REPORTSS ince December 2014, the World Economic Forum has strived to understand the impact of innovations on the financial services ecosystem, and to determine how all stakeholders would be affectedPHASE 1 Phase 2aimed to illustrate the role of financial infrastructure in enabling the future offinancial services . It focused on: Understanding the transformative power of blockchain on shaping the future capabilities and characteristics of financial infrastructure Defining a high level blueprint for fully digital identity protocols that simultaneously empowers users, and simplifies and de risks identitytransactionsPhase 2 culminated in the release of tworeports,The future of financial infrastructureandA Blueprint for Digital IdentityPHASE 2 Key FindingsKey UncertaintiesContext & ApproachWhat is a Fintech?

10 In this document we define a fintech to be a small, technology enabled, new entrant to financial services . This definition does not include large technology firms that enter financial services ( Apple with Apple Pay), or incumbent financial institutions who increase their focus on technology9 The final phase returns to the structure of the 2015 report, conducting a broad exploration of the forces reshaping the financial services ecosystem9 CONTEXT AND APPROACH | CURRENT REPORT CONTEXTThis report builds on the work of the previous reports, exploring the forces reshaping the structure of the financial system. It also considers evolutionary paths for the future of the system, as well as their implications for stakeholdersWhat are the innovations that have made the most impact on the financial ecosystem since the 2015 report, and what are the ideas that have failed to produce impact?